Existing law subjects fuels, including alcohol fuels, used to propel a motor vehicle on a highway to either the Motor Vehicle Fuel Tax Law or the Use Fuel Tax Law. Existing law subjects alcohol fuels containing no more than 15% gasoline to the Use Fuel Tax Law at the tax rate of 9 cents per gallon. Existing law subjects gasohol, which includes alcohol containing more than 15% gasoline, to the Motor Vehicle Fuel Tax Law, which through June 30, 2016, is taxed at the rate of 30 cents per gallon.

The Motor Vehicle Fuel Tax Law imposes a tax upon each gallon of motor vehicle fuel removed from a refinery or terminal rack in this state, entered into this state, or sold in this state. That law also provides a refund to any person who buys and uses tax-paid gasoline to produce a blended alcohol fuel of no more than 15% gasoline, which is taxed as a use fuel.

The Use Fuel Tax Law imposes an excise tax for the use of certain fuels, including an alcohol fuel that is ethanol or methanol containing not more than 15% gasoline. The tax is imposed on the user and requires the vendor who sells and delivers the fuel into a fuel tank of the user to collect the tax and give the user a receipt.

This bill instead, until January 1, 2022, would change the gasoline content percentage in both laws to 18 percent. By increasing the allowable percentage of gasoline in alcohol fuels subject to the Use Fuel Tax Law, this bill additionally would subject to that tax, users of alcohol fuels that contain more than 15% and not more than 18% gasoline.

This bill would include a change in state statute that would result in a taxpayer paying a higher tax within the meaning of Section 3 of Article XIIIA of the California Constitution, and thus would require for passage the approval of ²/₃ of the membership of each house of the Legislature.

This bill would take effect immediately as a tax levy.

This bill would take effect immediately as a tax levy.

Existing law, the Motor Vehicle Fuel Tax Law, imposes a tax upon the privilege of distributing motor fuel and defines the term gasohol for purposes of that law. Gasohol is defined as all blends of gasoline, and alcohol containing more than 15% gasoline.

This bill would redefine gasohol to instead mean all blends of gasoline, and alcohol containing more than 18% gasoline.

Existing law, the Use Fuel Tax Law, imposes an excise tax for the use of fuel, as defined, and provides that the excise tax imposed upon ethanol or methanol containing not more than 15% gasoline or diesel fuels shall be ¹/₂ of that rate.

This bill would instead apply that discounted rate to ethanol or methanol containing not more than 18% gasoline or diesel fuel.

This bill would take effect immediately as a tax levy.

GOVERNOR'S VETO

GV Bill Id:AB 2127

Author:(O'Donnell and Brough)

As Enrolled Ver:August 22, 2016

2/3 vote

SUMMARY: Increases the allowable percentage of gasoline that may be included in E85, from 15% to 18%, and makes corresponding changes to the definition of gasohol. Specifically, this bill:

1. Redefines the term "gasohol", for purposes of the Motor Vehicle Fuel Tax (MVFT) Law, as all blends of gasoline and alcohol containing more than 18% gasoline (instead of 15% per current law).
2. Amends Revenue and Taxation Code (R&TC) Section 8651.8 to provide that the excise tax imposed upon ethanol or methanol containing no more than 18% gasoline or diesel fuels (instead of 15% gasoline or diesel fuels per current law), shall be one-half the rate prescribed by R&TC Section 8651 for each gallon of fuel used.
3. Takes immediate effect as a tax levy.
4. Sunsets on January 1, 2022.

EXISTING LAW:

1. Imposes, under the MVFT Law, a tax upon the privilege of distributing motor fuel.
2. Defines "gasohol", for purposes of the MVFT Law, to mean all blends of gasoline, and alcohol containing more than 15% gasoline. (R&TC Section 7318.)
3. Imposes, under the Use Fuel Tax (UFT) Law, an excise tax of $0.18 per gallon on use fuels. (R&TC Section 8651.)
4. Defines "fuel", for purposes of the UFT Law, to include any combustible gas or liquid used in an internal combustion engine for propulsion on the highway, except fuel subject to taxation under the MVFT Law or the Diesel Fuel Tax Law. (R&TC Section 8604.)
5. Provides that the excise tax imposed upon ethanol or methanol containing no more than 15% gasoline or diesel fuels shall be one-half the rate prescribed by R&TC Section 8651 for each gallon of fuel used (i.e., $0.09). (R&TC Section 8651.8(a).)
6. Charges the State Air Resources Board (CARB) with adopting and implementing motor vehicle emission standards, in-use performance standards, and motor vehicle fuel specifications for the control of air contaminants and sources of air pollution, as specified. (Health and Safety Code (H&SC) Section 43013(a).)
7. Charges CARB with endeavoring to achieve the maximum degree of emission reduction possible from vehicular and other mobile sources in order to accomplish the attainment of the state standards at the earliest practicable date. (H&SC Section 43018(a).)

FISCAL EFFECT: The State Board of Equalization (BOE) notes that, accounting for both the "foregone" gasoline tax revenue and the increase in gasoline tax refunds, the total revenue loss is estimated to be roughly $98,000 annually.

COMMENTS:

1. The author has provided the following statement in support of this bill:

In order to ensure effective policy, the Legislature [should] ensure our laws and regulations remain consistent in both language and intent. Currently, the tax code and air resource protection requirements have conflicting specifications for blended ethanol fuels. Specifically, the tax code charges half the normal Use Fuel Tax rate on ethanol fuels containing no more than 15% gasoline. However, the Air Resources Board has set specifications for E-85 (a common type of blended ethanol fuel) requiring the total fuel volume to contain a minimum of 15% of hydrocarbons (e.g., gasoline). This means the minimum gasoline content required by the ARB is the maximum content allowable to qualify for the tax incentive. Due to this conflict, fuel marketers have difficulties recouping the excise tax paid on E-85 blends to reflect the lower tax rate allowed for such alternative fuels. AB 2127 resolves this conflict and allows E-85 purchases to collect on past owed tax refunds.

1. Revenue and Taxation Committee Staff Comments
   1. The UFT Law: The UFT Law sets the excise tax rate for ethanol and methanol containing no more than 15% gasoline or diesel at one-half the normal rate specified by R&TC Section 8651 (i.e., $0.09 per gallon instead of $0.18 per gallon). Ethanol and methanol containing more than 15% gasoline is defined as "gasohol" under the MVFT Law. While the use fuel tax is technically imposed on the use of fuel, the vendor who sells or delivers such fuel into a fuel tank must, at the time of sale, collect the tax from the user and provide a receipt. (R&TC Section 8732.)

Vendors are required to have permits with the BOE and file returns. Use fuel vendor responsibilities include reporting and paying the use fuel tax on alcohol fuels, including E85^[1], delivered into motor vehicle fuel tanks. Specifically, the vendor is required to collect and remit to the BOE the $0.09 per gallon use fuel tax on the full volume of E85 sold or dispensed from a retail pump.

• 1. The MVFT Law: The state imposes an excise tax under the MVFT Law of $0.30^[2] per gallon on the removal of gasoline (except for aviation gasoline) at the refinery or terminal rack, upon entry into California, and upon sale to an unlicensed person. Refunds of the excise tax paid on gasoline are allowed under certain circumstances to certain persons. (R&TC Section 8101.) For example, a refund is allowed to any person who buys gasoline to produce a blended fuel used to operate a motor vehicle on the state's highways when that blended fuel is taxed as a use fuel. (R&TC Section 8101(h).)

The BOE is responsible for various gasoline tax administrative functions including registration, licensing, return processing, auditing, and appeals. The State Controller's Office, in turn, is responsible for the collection of delinquent gasoline taxes and the issuance of excise tax refunds for gasoline not used on the highway. The gasoline tax collection point differs from that applicable to use fuels. Specifically, the gasoline tax is generally collected high up the distribution chain at the "terminal rack" level.

• 1. Alcohol fuel blends: Alcohol fuel blends are the result of blending two components – ethanol or methanol fuel and gasoline or diesel fuel. E85, for example, is produced by blending ethanol fuel and gasoline. The preferential excise tax rate for alcohol blends was originally established in 1981. According to the sponsor, the proponents of this lower rate were primarily interested in stimulating alcohol fuel production and sale. Specifically, the proponents argued that increased alcohol fuel production would reduce dependence on imported oil, create market parity by matching tax rates to alcohol fuel's lower BTU output, and promote Californian agricultural products used in creating alcohol fuels.
  2. CARB regulations: The author notes that "[i]n furtherance of its mission to reduce vehicle emissions, CARB has set specifications for E-85 requiring that the total fuel volume contain a minimum of 79% ethanol and 15-21% of hydrocarbons."^[3] The UFT Law, however, only provides the lower $0.09 per gallon tax rate to E85 containing no more than 15% gasoline. According to the author's office, the tension between these standards has made it difficult for some blenders to obtain gas tax refunds on their fuel blends. Specifically, the author's office notes:

While those purchasing pre-blended fuels can self-certify the content of their fuel with the Board of Equalization, those blending ethanol and gas themselves must apply to the State Controller's office to receive a refund of the tax they paid to purchase their fuel components. To receive this refund, blenders must submit receipts for their fuel purchases that show an exact 15% ratio of gas to ethanol was purchased. While some blenders have successfully claimed their tax credit, others have had confusion over what elements of their blend, such as denaturant, count as gasoline for tax purposes. As a result, some blenders have been denied their tax credit after making purchases and setting prices over the past year with the expectation of receiving it. This undermines the goals of the tax credit and CARB's mission by removing an incentive to use ethanol blends over gasoline.

• 1. Why not blend E85 with exactly 15% gasoline? If a blender were to create an ethanol blend with exactly 15% gasoline and 85% ethanol, this blend would seemingly meet both CARB's blend requirements and the 15% cap imposed by R&TC Section 8651.8. Thus, the blend would be eligible for the preferential tax rate of $0.09 per gallon, and the blender would be eligible for a refund of road taxes paid. CARB staff notes, however, that such a blend would likely not meet standards in place for the fuel's minimum Reid Vapor Pressure (RVP). RVP is a measure of fuel volatility, which must be managed to avoid smog formation in the summer. CARB staff notes that ethanol blends containing more than 15% gasoline would be more likely to meet the minimum RVP requirement. While CARB has apparently not instructed blenders to alter the gasoline content of their blends, it has informed blenders of this fact.

Despite all this, CARB data suggest that many, if not most, blenders are still producing E85 with only 15% gasoline. All E85 sold in California is sold under "test program exemptions". As a result, fuel blenders must provide fuel quality test results. CARB notes that this fuel quality data from 2014 and the first three months of 2015 indicate an average ethanol content of 82.75%, and an average gasoline content of 15%, with the remaining 2.25% comprised of denaturants. Fuel industry representatives, however, note that "denaturants" are gasoline-based, thereby threatening to increase the overall blend's gasoline content above 15%. If this is the source of potential conflict, perhaps it would be preferable to amend the R&TC to clarify that gasoline-based denaturants shall not be counted toward the 15% cap on gasoline for E85. BOE staff, however, notes that as a matter of administrative practice, denaturants are not counted currently toward the 15% gasoline cap. Proponents, however, contend that increasing the allowable percentage of gasoline to 18% would provide blenders a much-needed margin for error when attempting to satisfy both CARB's regulations and the provisions of the R&TC.

GOVERNOR'S VETO MESSAGE:

I am returning the following seven bills without my signature:

Assembly Bill 717

Assembly Bill 724

Assembly Bill 1561

Assembly Bill 2127

Assembly Bill 2728

Senate Bill 898

Senate Bill 907

Each of these bills creates a new tax break or expands an existing tax break. In total, these bills would reduce revenues by about $300 million through 2017-18.

As I said last year, tax breaks are the same as new spending -- they both cost the General Fund money. As such, they must be considered during budget deliberations so that all spending proposals are weighed against each other at the same time. This is even more important when the state's budget remains precariously balanced.

Therefore, I cannot sign these measures.

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0005053

1. The BOE notes that E85, an ethanol and gasoline blend, is the most common blended fuel under the UFT Law. ↑

2. This rate is comprised of an $0.18 excise tax and a $0.12 surtax. ↑

3. The sponsor notes that these regulations were filed on December 9, 1992, and became operative on January 1, 1993. ↑

 THIRD READING  

Bill No: AB 2127

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 11-0, 6/21/16

AYES: Beall, Cannella, Allen, Bates, Gaines, Galgiani, Leyva, McGuire, Mendoza, Roth, Wieckowski

SENATE GOVERNANCE & FIN. COMMITTEE: 5-1, 6/29/16

AYES: Hertzberg, Beall, Hernandez, Lara, Moorlach

NOES: Nguyen

NO VOTE RECORDED: Pavley

SENATE APPROPRIATIONS COMMITTEE: 6-0, 8/1/16

AYES: Lara, Beall, Hill, McGuire, Mendoza, Nielsen

NO VOTE RECORDED: Bates

ASSEMBLY FLOOR: 67-0, 5/27/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: California Independent Oil Marketers Association

DIGEST: This bill increases the allowable percentage of gasoline or diesel fuel that may be included in blended alcohol fuel from 15% to 18%, and makes corresponding changes to the definition of “gasohol.”

ANALYSIS:

Existing law:

1. Imposes, under the Motor Vehicle Fuel Tax (MVFT) Law, a tax upon the privilege of distributing motor fuel.
2. Defines gasohol, for purposes of the MVFT, to mean all blends of gasoline and alcohol containing more than 15% gasoline.
3. Imposes, under the Use Fuel Tax (UFT) Law, an excise tax of $0.18 per gallon on use fuels.
4. Defines fuel, for purposes of the UFT Law, to include any combustible gas or liquid used in an internal combustion engine for propulsion on the highway, except fuel subject to taxation under the MVFT Law or the Diesel Fuel Tax Law.
5. Provides that the excise tax imposed upon ethanol or methanol containing no more than 15% gasoline or diesel fuels shall be one-half the rate (i.e., $0.09) prescribed by existing law (i.e., $0.18) for each gallon of fuel used.
6. Charges the California Air Resources Board (CARB) with adopting and implementing motor vehicle emission standards, in-use performance standards, and motor vehicle fuel specifications for the control of air contaminants and sources of air pollution, as specified.
7. Charges CARB with engaging in efforts to achieve the maximum degree of emission reduction possible from vehicular and other mobile sources in order to accomplish the attainment of the state standards at the earliest practicable date.

This bill:

1. Redefines the term gasohol, for purposes of MVFT Law, as all blends of gasoline and alcohol containing more than 18% gasoline (instead of 15% per current law).
2. Provides that blended alcohol fuel containing no more than 18% gasoline or diesel fuels (instead of the existing 15% gasoline or diesel fuels) qualifies to be levied at $0.09 for each gallon of fuel used (i.e., one-half the existing rate of $0.18).
3. Provides that the increased blended percentages specified in this bill are to remain in effect for five years and become inoperative on January 1, 2022.
4. Takes immediate effect as a tax levy.

Comments

1. Purpose. The author notes, “Currently, the tax code and air resource protection requirements have conflicting specifications for blended ethanol fuels. Specifically, the tax code charges half the normal UFT rate on ethanol fuels containing no more than 15% gasoline. However, the CARB has set specifications for E-85 [a common type of blended ethanol fuel] requiring the total fuel volume to contain a minimum of 15% of hydrocarbons [e.g., gasoline]. This means the minimum gasoline content required by the CARB is the maximum content allowable to qualify for the tax incentive. Due to this conflict, fuel marketers have difficulties recouping the excise tax paid on E-85 blends to reflect the lower tax rate allowed for such alternative fuels. AB 2127 remedies this conflict.”
2. Alcohol fuel blends. Alcohol fuel blends are the result of blending two components: ethanol or methanol fuel and gasoline or diesel fuel. E-85, for example, is produced by blending ethanol fuel and gasoline. The preferential excise tax rate for alcohol blends was originally established in 1981. Proponents of alcohol fuel blends argue these preferential rates (i.e., lower rates) were primarily interested in stimulating alcohol-fuel production and sale. Specifically, an increase in alcohol-fuel production could potentially reduce imported oil, create market parity by matching tax rates to alcohol fuels’ lower BTU output, and promote California agricultural products used in creating alcohol fuels.
3. UFT Law. The UFT Law sets the excise tax rate for ethanol and methanol containing no more than 15% gasoline or diesel at one-half the normal rate specified by existing law (i.e., $0.09 per gallon instead of $0.18 per gallon). Ethanol and methanol containing more than 15% gasoline is defined as gasohol under the MVFT Law (see section below). While the UFT is technically imposed on the use of fuel, the vendor who sells or delivers such fuel into a fuel tank must, at the time of sale, collect the tax from the user and provide a receipt.

Vendors are required to have permits with the Board of Equalization (BOE) and file returns. A use fuel vendor’s responsibilities include reporting and paying the use fuel tax on alcohol fuels, including E-85, delivered into motor vehicle fuel tanks. Specifically, the vendor is required to collect and remit to the BOE the $0.09 per gallon use fuel tax on the full volume of E-85 sold or dispensed from a retail pump.

1. MVFT Law. The state imposes an excise tax under the MVFT Law of $0.30 per gallon on the removal of gasoline (except for aviation gasoline) at the refinery or terminal rack, upon entry into California, and upon sale to an unlicensed person. Refunds of the excise tax paid on gasoline are allowed under certain circumstances to certain persons. For example, in this instance, a refund is allowed to any person who buys gasoline to produce a blended fuel used to operate a motor vehicle on the state’s highways when that blended fuel is taxed as a use fuel.
2. Wiggle room. Both the author and sponsor of this bill argue that due to the complexity of producing blended alcohol fuel (E-85 in particular) and various CARB regulations, the process of producing blended alcohol fuel that is precisely 15% gasoline and 85% ethanol is very difficult. In order to qualify for the $0.09/gallon user tax exemption, a blended fuel must be comprised of 85% ethanol. However, many times these blends slightly exceed the 15%/85% ratio, which disqualifies the producer from the $0.09/gallon exemption. This bill will provide blended-alcohol fuel producers with the flexibility to still qualify for the $0.09/gallon rate and remain in compliance with various CARB regulations and statutes.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee, BOE estimates net revenue losses could be in the range of $80,000 to $114,000 annually for five years (Motor Vehicle Fuel Account). These figures account for both reduced excise tax revenues and increased refunds. BOE indicates that any administrative costs would be absorbable (General Fund).

SUPPORT: (Verified 8/2/16)

California Independent Oil Marketers Association (source)

POET LLC

Propel Fuels

OPPOSITION: (Verified 8/2/16)

California Department of Finance

California Tax Reform Association

ASSEMBLY FLOOR: 67-0, 5/27/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bonilla, Bonta, Burke, Calderon, Campos, Chang, Chau, Chávez, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Harper, Roger Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder, Lopez, Maienschein, Mathis, Mayes, McCarty, Medina, Mullin, Nazarian, Obernolte, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Bloom, Brough, Brown, Chiu, Dodd, Eduardo Garcia, Grove, Hadley, Jones-Sawyer, Low, Melendez, O'Donnell, Ting

Prepared by:

8/3/16 18:56:57

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 2127 (O'Donnell) - Taxation: motor vehicle fuel: use fuel: alcohol fuels

This bill does not meet the criteria for referral to the Suspense File.

Bill Summary:

AB 2127 would increase the allowable percentage of gasoline that may be included in E85 fuel blend from 15% to 18%, and make a corresponding change to the definition of “gasohol” to mean all blends of gasoline and alcohol that contain more than 18% gasoline (instead of 15%). These changes would only remain in effect until January 1, 2022.

Fiscal Impact:

• The Board of Equalization (BOE) estimates net revenue losses could be in the range of $80,000 to $114,000 annually for five years (Motor Vehicle Fuel Account). These figures account for both reduced excise tax revenues and increased refunds. (see staff comments)
  
• BOE indicates that any administrative costs would be absorbable. (General Fund)

Background:

The Motor Vehicle Fuel Tax (MVFT) Law imposes a $0.30 per gallon excise tax for the privilege of distributing motor fuel. The tax is imposed on the removal of gasoline at the refinery or terminal rack when it enters the state and upon sale to an unlicensed person. Under existing law, “gasohol" fuel, defined as all blends of gasoline and alcohol containing more than 15% gasoline, is subject to the $0.30 per gallon excise tax, whereas blends of gasoline and alcohol containing less than 15% gasoline is subject to the Use Fuel Tax (UFT) Law.

UFT Law imposes an excise tax of $0.18 per gallon on fuel used. The law defines “fuel” to include any combustible gas or liquid used in an internal combustion engine for propulsion on the highway except fuel taxed as a motor vehicle fuel (gasoline) or diesel fuel. UFT Law also defines gasohol as all blends of gasoline and alcohol containing more than 15% gasoline. An exception to the rate of $0.18 per gallon is the $0.09 per gallon rate imposed on ethanol and methanol blends containing up to 15% gasoline, known as an E85 blend.

Existing law provides for a refund of the gasoline excise tax if a person who buys and uses gasoline for the purposes of producing a blended fuel, such as E85, when that fuel is taxed as a use fuel. For instance, a fuel blender who purchases fuel at the refinery or terminal rack and pays the $0.30 per gallon excise tax, then blends the gasoline “below the rack” and sells it as E85, where it is taxed at the UFT rate of $0.09 per gallon, is eligible for a refund on the difference between the $0.30 and $0.09 per gallon rate.

Proposed Law:

AB 2127 would increase the allowable percentage of gasoline that may be included in E85 fuels from 15% to 18% for five years. Specifically, this bill would:

• Revise the definition of “gasohol” for purposes of the MVFT Law to mean all blends of gasoline, and alcohol containing more than 18% of gasoline (from 15%) until January 1, 2022.
• Specify that the excise tax imposed on ethanol or methanol containing no more than 18% gasoline or diesel fuels (rather than 15%) shall be half the amount imposed on fuel used, for purposes of the UFT Law, until January 1, 2022.

Related Legislation:

AB 1442 (O’Donnell), which was held on the Assembly Revenue and Taxation Committee’s Suspense File last year, would have increased the allowable percentage of gasoline that may be included in E85 from 15% to 21%, and make corresponding changes to the definition of gasohol.

Staff Comments:

This bill would increase the allowable percentage of gasoline that may be included in an E85 fuel blend from 15% to 18%. This would result in both an increase in amounts E85 fuels that can be taxed at the discounted UFT rate of $0.09 per gallon (instead of $0.18 per gallon) and an increase in refunds of MVF taxes paid by blenders. As the amount of gasoline blended into E85 increases, the state experiences a revenue loss from decreased UFT tax revenues. This also increases the amount of refunds to blenders. Using historical E85 blended fuel volumes from the past three fiscal years, the BOE estimates combined revenue losses (from both increased refunds and decreased gas tax revenues) of $79,456 in 2012-13, $113,858 in 2013-14, and $102,093 in 2014-15, or an average loss of about $98,000 annually. To the extent the industry changes production methods and volumes and blends more E85 at the rack, rather than below the rack, the revenue impacts could grow.

-- END --

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Robert M. Hertzberg, Chair

2015 - 2016 Regular

Taxation: motor vehicle fuel: use fuel: alcohol fuels

Increases the allowable percentage of gasoline that may be included into ethanol fuel, from 15% to 18%.

Background

The Motor Vehicle Fuel Tax (MVFT) Law imposes a $0.30 per gallon excise tax for the privilege of distributing motor fuel. Under existing law, “gasohol" fuel, defined as all blends of gasoline and alcohol containing more than 15% gasoline, is subject to the $0.30 per gallon excise tax, whereas blends of gasoline and alcohol containing less than 15% gasoline is subject to the Use Fuel Tax (UFT) Law.

UFT Law imposes an excise tax of $0.18 per gallon on fuel used. The law defines “fuel” to include any combustible gas or liquid used in an internal combustion engine for propulsion on the highway except fuel taxed as a motor vehicle fuel (gasoline) or diesel fuel. UFT Law also defines gasohol as all blends of gasoline and alcohol containing more than 15% gasoline. An exception to the rate of $0.18 per gallon is the $0.09 per gallon rate imposed on ethanol and methanol blends containing up to 15% gasoline, known as an E85 blend.

Assembly Bill 2127 seeks to change the definition of gasohol to mean all blends of gasoline and alcohol containing more than 18% gasoline, so that gasohol blends with 18% or less gasoline qualify for the reduced excise tax rate.

Proposed Law

Assembly Bill 2127 increases the allowable percentage of gasoline that may be included in E85, from 15% to 18%. Specifically, this bill:

• Redefines the term gasohol, for purposes of the MVFT Law, as all blends of gasoline and alcohol containing more than 18% gasoline.
• Provides that the excise tax imposed upon ethanol or methanol containing no more than 18% gasoline or diesel fuels shall be one-half the excise tax of $0.18 per gallon on fuel used.
• Takes immediate effect as a tax levy and remain in effect until January 1, 2022.

State Revenue Impact

According to the Board of Equalization (BOE) the total revenue loss is estimated to be roughly $98,000 annually.

Comments

1. Purpose of the bill. According to the author “In order to ensure effective policy, the Legislature should ensure our laws and regulations remain consistent in both language and intent. Currently, the tax code and air resource protection requirements have conflicting specifications for blended ethanol fuels. Specifically, the tax code charges half the normal Use Fuel Tax rate on ethanol fuels containing no more than 15 percent gasoline. However, the Air Resources Board has set specifications for E-85 (a common type of blended ethanol fuel) requiring the total fuel volume to contain a minimum of 15% of hydrocarbons (e.g., gasoline). This means the minimum gasoline content required by the ARB is the maximum content allowable to qualify for the tax incentive. Due to this conflict, fuel marketers have difficulties recouping the excise tax paid on E-85 blends to reflect the lower tax rate allowed for such alternative fuels. AB 2127 resolves this conflict and allows E-85 purchases to collect on past owed tax refunds.”

2. E85. E85 fuel is derived from blending ethanol fuel and gasoline. Typically, gasoline represents 15% of the blended product. However, the actual percentage may vary. Current California Air Resources Board (CARB) standards specify that allowable percentage of gasoline in E85 is a range of 15 to 21%. While CARB standards establish an acceptable range of the E85 share that can be gasoline, existing state tax law is more restrictive. The UFT Law sets the excise tax rate for fuels. Vendors that sell fuel placed in the tank of motor vehicles, such as retailers and wholesalers, are charged the excise tax. UFT Law sets the excise tax rate for ethanol and methanol containing no more than 15% gasoline at a lower rate, even though E85 may consist of more than 15% gasoline if CARB standards are followed. The MVFT Law similarly has a more restrictive definition of E85. The MVFT is imposed on each gallon of fuel entered into, or removed from a refinery or terminal rack in, California. The tax is typically paid by blenders and refiners. The MVFT Law defines ethanol and methanol containing more than 15% gasoline as “gasohol” rather than a blended fuel like E85.

3. Blended fuel. Under existing law, a gasoline tax refund is allowed to any person who buys and uses gasoline for the purposes of producing a blended fuel, such as E85, when that fuel is taxed as a use fuel. In other words, a blender can get a reimbursement of the portion of the fuel that is taxed as gasoline prior to blending. For example, under MVFT Law, the tax rate prior to blending for an E85 blend is $0.30 per gallon, but once blended the rate is $0.09 per gallon, which entitles the purchaser to a refund for the difference between the $0.30 per gallon and $0.09 per gallon rate.

3. Related legislation. AB 1442 (O'Donnell) would have increased the allowable percentage of gasoline that may be included in E85, from 15% to 21%, and would have made corresponding changes to the definition of gasohol. AB 1442 was held on the Assembly Committee on Revenue and Taxation’s Suspense File.

4. Incoming! The Senate Transportation and Housing Committee approved AB 2127 by a vote of 11-0 on June 21, 2016.

Assembly Actions

Assembly Revenue and Taxation 9-0

Assembly Appropriations 20-0

Assembly Floor 67-0

Support and Opposition

(6/23/16)

Support: California Independent Oil Marketers Association; POET LLC; Propel Fuels.

Opposition: California Department of Finance; California Tax Reform Association.

-- END --

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2015 - 2016 Regular

Bill No: Hearing Date: 6/21/2016

SUBJECT:

DIGEST: This bill increases the allowable percentage of gasoline or diesel fuel that may be included in blended alcohol fuel from 15% to 18%, and makes corresponding changes to the definition of “gasohol.”

ANALYSIS:

Existing law:

1. Imposes, under the Motor Vehicle Fuel Tax (MVFT) Law, a tax upon the privilege of distributing motor fuel.
2. Defines gasohol, for purposes of the MVFT, to mean all blends of gasoline and alcohol containing more than 15% gasoline.
3. Imposes, under the Use Fuel Tax (UFT) Law, an excise tax of $0.18 per gallon on use fuels.
4. Defines fuel, for purposes of the UFT Law, to include any combustible gas or liquid used in an internal combustion engine for propulsion on the highway, except fuel subject to taxation under the MVFT Law or the Diesel Fuel Tax Law.
5. Provides that the excise tax imposed upon ethanol or methanol containing no more than 15% gasoline or diesel fuels shall be one-half the rate (i.e., $0.09) prescribed by existing law (i.e., $.18) for each gallon of fuel used.
6. Charges the State Air Resources Board (CARB) with adopting and implementing motor vehicle emission standards, in-use performance standards, and motor vehicle fuel specifications for the control of air contaminants and sources of air pollution, as specified.
7. Charges CARB with engaging in efforts to achieve the maximum degree of emission reduction possible from vehicular and other mobile sources in order to accomplish the attainment of the state standards at the earliest practicable date.

This bill:

1. Redefines the term gasohol, for purposes of MVFT Law, as all blends of gasoline and alcohol containing more than 18% gasoline (instead of 15% per current law).
2. Provides that blended alcohol fuel containing no more than 18% gasoline or diesel fuels (instead of the existing15% gasoline or diesel fuels) qualifies to be levied at $.09 for each gallon of fuel used (i.e., one-half the existing rate of $.18).
3. Provides that the increased blended percentages specified in this bill are to remain in effect for five years and become inoperative on January 1, 2022.
4. Takes immediate effect as a tax levy.

COMMENTS:

1. Purpose. The author notes, “Currently, the tax code and air resource protection requirements have conflicting specifications for blended ethanol fuels. Specifically, the tax code charges half the normal UFT rate on ethanol fuels containing no more than 15 % gasoline. However, the CARB has set specifications for E-85 (a common type of blended ethanol fuel) requiring the total fuel volume to contain a minimum of 15% of hydrocarbons (e.g., gasoline). This means the minimum gasoline content required by the ARB is the maximum content allowable to qualify for the tax incentive. Due to this conflict, fuel marketers have difficulties recouping the excise tax paid on E-85 blends to reflect the lower tax rate allowed for such alternative fuels. AB 2127 remedies this conflict.”
2. Alcohol fuel blends. Alcohol fuel blends are the result of blending two components: ethanol or methanol fuel and gasoline or diesel fuel. E-85, for example, is produced by blending ethanol fuel and gasoline. The preferential excise tax rate for alcohol blends was originally established in 1981. Proponents of alcohol fuel blends argue these preferential rates (i.e., lower rates) were primarily interested in stimulating alcohol-fuel production and sale. Specifically, an increase in alcohol-fuel production could potentially reduce imported oil, create market parity by matching tax rates to alcohol fuels lower BTU output, and promote Californian agricultural products used in creating alcohol fuels.
3. UFT Law. The UFT Law sets the excise tax rate for ethanol and methanol containing no more than 15% gasoline or diesel at one-half the normal rate specified by existing law (i.e., $0.09 per gallon instead of $0.18 per gallon). Ethanol and methanol containing more than 15% gasoline is defined as gasohol under the MVFT Law (see section below). While the UFT is technically imposed on the use of fuel, the vendor who sells or delivers such fuel into a fuel tank must, at the time of sale, collect the tax from the user and provide a receipt.

Vendors are required to have permits with the Board of Equalization (BOE) and file returns. A use fuel vendor’s responsibilities include reporting and paying the use fuel tax on alcohol fuels, including E-85, delivered into motor vehicle fuel tanks. Specifically, the vendor is required to collect and remit to the BOE the $0.09 per gallon use fuel tax on the full volume of E-85 sold or dispensed from a retail pump.

1. MVFT Law. The state imposes an excise tax under the MVFT Law of $0.30 per gallon on the removal of gasoline (except for aviation gasoline) at the refinery or terminal rack, upon entry into California, and upon sale to an unlicensed person. Refunds of the excise tax paid on gasoline are allowed under certain circumstances to certain persons. For example, in this instance, a refund is allowed to any person who buys gasoline to produce a blended fuel used to operate a motor vehicle on the state’s highways when that blended fuel is taxed as a use fuel.
2. Wiggle room. Both the author and sponsors of this bill argue that due to the complexity of producing blended alcohol fuel (E-85 in particular) and various CARB regulations, the process of producing blended alcohol fuel that is precisely 15% gasoline and 85% ethanol is very difficult. In order to qualify for the $.09/gallon user tax exemption, a blended fuel must be comprised of 85% ethanol. However, many times these blends slightly exceed the 15%/85% ratio, which disqualifies the producer from the $.09/gallon exemption. This bill will provide blended-alcohol fuel producers with the flexibility to still qualify for the $.09/gallon rate and remain in compliance with various CARB regulations and statutes.
3. Double-referral. This bill is also referred to the Senate Committee on Governance and Finance.

Related Legislation:

AB 1442 (O'Donnell, 2015) — would have increased the allowable percentage of gasoline that may be included in E-85 from 15% to 21% and makes corresponding changes to the definition of gasohol. This bill was held on suspense in the Assembly Revenue and Taxation Committee.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

Assembly votes:

Floor: 67-0

Appr: 20-0

Rev&Tax: 9-0

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 15, 2016.)

SUPPORT:

California Independent Oil Marketers Association (sponsor)

Propel Fuels

OPPOSITION:

None received

-- END --

Date of Hearing: May 18, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2127

Author:(O'Donnell) – As Amended Ver:May 12, 2016

Urgency: Yes State Mandated Local Program: No Reimbursable: No

This bill increases the allowable percentage of gasoline that may be included in ethanol and methanol, from 15% to 18%, for the purposes of the excise tax upon ethanol and methanol, and makes a corresponding change to the definition of “Gasohol” for the purposes of the Motor Vehicle Fuel Tax (MVFT) Law. These expanded definitions will sunset on January 1, 2022.

FISCAL EFFECT:

Ongoing annual revenue loss of approximately $98,000 annually.

COMMENTS:

1. Purpose. According to the author, the purpose of this bill is to provide incentives to produce fuel products with lower emissions and carbon intensity. It does this by ensuring that state laws and regulations related to fuel standards are consistent in both language and intent.
2. Background. E85 fuel is derived from blending ethanol fuel and gasoline. Typically, gasoline represents 15% of the blended product. However, the actual percentage may vary. Current California Air Resources Board (CARB) standards specify that allowable percentage of gasoline in E85 is a range of 15 to 21%.

While CARB standards establish an acceptable range of the E85 share that can be gasoline, existing state tax law is more restrictive. The Use Fuel Tax (UFT) Law sets the excise tax rate for fuels. Vendors that sell fuel placed in the tank of motor vehicles, such as retailers and wholesalers, are charged the excise tax. UFT Law sets the excise tax rate for ethanol and methanol containing no more than 15% gasoline at a lower rate, even though E85 may consist of more than 15% gasoline if CARB standards are followed.

The MVFT Law similarly has a more restrictive definition of E85. The MVFT is imposed on each gallon of fuel entered into, or removed from a refinery or terminal rack in, California. The tax is typically paid by blenders and refiners. The MVFT Law defines ethanol and methanol containing more than 15% gasoline as “gasohol” rather than a blended fuel like E85.

1. Blenders. Under existing law, a gasoline tax refund is allowed to any person who buys and uses gasoline for the purposes of producing a blended fuel, such as E85, when that fuel is taxed as a use fuel. In other words, a blender can get a reimbursement of the portion of the fuel that is taxed as gasoline prior to blending. The author notes that the tension between these standards has made it difficult for some blenders to obtain gas tax refunds on their fuel blends. The author notes that to receive this refund, blenders must submit receipts for their fuel purchases that show an exact 15% ratio of gas to ethanol, even though there is some confusion over what elements of their blend count as gasoline for tax purposes.
2. Reid Vapor Pressure (RVP). Another wrinkle for fuel blenders is that an ethanol blend with exactly 15% gasoline and 85% ethanol – which meets the definition required for a tax reimbursement and as well as CARB specifications – does not meet standards in place for the minimum RVP. RVP is a measure of fuel volatility that much be managed to avoid smog formation in the summer.

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: May 9, 2016

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Sebastian Ridley-Thomas, Chair

ABPCA Bill Id:AB 2127 (

Author:O'Donnell) – As Introduced Ver:February 17, 2016

Majority vote. Tax levy. Fiscal committee.

SUBJECT: Motor vehicle fuel: gasohol

SUMMARY: Increases the allowable percentage of gasoline that may be included in E85, from 15% to 18%, and makes corresponding changes to the definition of gasohol. Specifically, this bill:

1. Redefines the term "gasohol", for purposes of the Motor Vehicle Fuel Tax (MVFT) Law, as all blends of gasoline and alcohol containing more than 18% gasoline (instead of 15% per current law).
2. Amends Revenue and Taxation Code (R&TC) Section 8651.8 to provide that the excise tax imposed upon ethanol or methanol containing no more than 18% gasoline or diesel fuels (instead of 15% gasoline or diesel fuels per current law), shall be one-half the rate prescribed by R&TC Section 8651 for each gallon of fuel used.
3. Takes immediate effect as a tax levy.

EXISTING LAW:

1. Imposes, under the MVFT Law, a tax upon the privilege of distributing motor fuel.
2. Defines "gasohol", for purposes of the MVFT Law, to mean all blends of gasoline, and alcohol containing more than 15% gasoline. (R&TC Section 7318.)
3. Imposes, under the Use Fuel Tax (UFT) Law, an excise tax of $0.18 per gallon on use fuels. (R&TC Section 8651.)
4. Defines "fuel", for purposes of the UFT Law, to include any combustible gas or liquid used in an internal combustion engine for propulsion on the highway, except fuel subject to taxation under the MVFT Law or the Diesel Fuel Tax Law. (R&TC Section 8604.)
5. Provides that the excise tax imposed upon ethanol or methanol containing no more than 15% gasoline or diesel fuels shall be one-half the rate prescribed by R&TC Section 8651 for each gallon of fuel used (i.e., $0.09). (R&TC Section 8651.8(a).)
6. Charges the State Air Resources Board (CARB) with adopting and implementing motor vehicle emission standards, in-use performance standards, and motor vehicle fuel specifications for the control of air contaminants and sources of air pollution, as specified. (Health and Safety Code (H&SC) Section 43013(a).)
7. Charges CARB with endeavoring to achieve the maximum degree of emission reduction possible from vehicular and other mobile sources in order to accomplish the attainment of the state standards at the earliest practicable date. (H&SC Section 43018(a).)

FISCAL EFFECT: The State Board of Equalization (BOE) notes that, accounting for both the "foregone" gasoline tax revenue and the increase in gasoline tax refunds, the total revenue loss is estimated to be roughly $98,000 annually.

COMMENTS:

1. The author has provided the following statement in support of this bill:

In order to ensure effective policy, the Legislature [should] ensure our laws and regulations remain consistent in both language and intent. Currently, the tax code and air resource protection requirements have conflicting specifications for blended ethanol fuels. Specifically, the tax code charges half the normal Use Fuel Tax rate on ethanol fuels containing no more than 15 percent gasoline. However, the Air Resources Board has set specifications for E-85 (a common type of blended ethanol fuel) requiring the total fuel volume to contain a minimum of 15% of hydrocarbons (e.g., gasoline). This means the minimum gasoline content required by the ARB is the maximum content allowable to qualify for the tax incentive. Due to this conflict, fuel marketers have difficulties recouping the excise tax paid on E-85 blends to reflect the lower tax rate allowed for such alternative fuels. AB 2127 resolves this conflict and allows E-85 purchases to collect on past owed tax refunds.

1. This bill is sponsored by the California Independent Oil Marketers Association, which notes the following:

Simply put, AB 2127 extends an existing 50 percent excise tax discount for ethanol blended fuels to those blends that contain no more than 18 percent gasoline. This harmonizes state tax law, giving incentives to high-ethanol blends of fuel, with the stricter requirements imposed by the Air Resources Board (CARB) to protect air quality emission standards.

Several of our members have had difficulty in obtaining already-paid road tax on gasoline after it has been blended with high volumes of ethanol. This allows fuel suppliers who provide E-85 to fuel consumers a needed tax break, thereby incentivizing sale of that product and removing a business uncertainty from fuel blending.

The language in this measure has been thoroughly vetted with the appropriate enforcement and policy entities and there is no objection to this proposal from them.

By giving ethanol blenders a 3% range for gasoline content (between 15-18%), they can plan their business operations more reliably and continue providing this alternative fuel. This will ensure alignment between our tax incentives and regulations that both fundamentally reduce GHG emissions and protect our air quality.

1. The BOE notes the following in its staff analysis of this bill:
   1. Effect of the bill: "By increasing the allowable percentage of gasoline blended into E85, from 15% to 18%, the resulting blend would be taxed at a lower rate than is currently imposed on the gasoline portion."
   2. No administrative concerns with the increase of gasoline blended into E85 from 15% to 18%: "BOE's UFTL duties include registration, returns, collection, audits, and refunds. The proposed change in the specified blending percentage of E85 and gasohol fuels does not complicate administration."
   3. The SCO administers the specific gasoline tax refund provisions: "The SCO administers gasoline tax refunds if the gasoline is used for purposes other than operating a vehicle on the state's public highways and other exempt uses."
   4. Below-the-rack blenders sell the E85 with tax-paid gasoline and are authorized to obtain a refund: "Below-the-rack blenders already are authorized to obtain a refund of the tax- paid gasoline component of the E85, as provided by law and authorized by the SCO."
2. Committee Staff Comments
   1. The UFT Law: The UFT Law sets the excise tax rate for ethanol and methanol containing no more than 15% gasoline or diesel at one-half the normal rate specified by R&TC Section 8651 (i.e., $0.09 per gallon instead of $0.18 per gallon). Ethanol and methanol containing more than 15% gasoline is defined as "gasohol" under the MVFT Law. While the use fuel tax is technically imposed on the use of fuel, the vendor who sells or delivers such fuel into a fuel tank must, at the time of sale, collect the tax from the user and provide a receipt. (R&TC Section 8732.)

Vendors are required to have permits with the BOE and file returns. Use fuel vendor responsibilities include reporting and paying the use fuel tax on alcohol fuels, including E85^[1], delivered into motor vehicle fuel tanks. Specifically, the vendor is required to collect and remit to the BOE the $0.09 per gallon use fuel tax on the full volume of E85 sold or dispensed from a retail pump.

• 1. The MVFT Law: The state imposes an excise tax under the MVFT Law of $0.30^[2] per gallon on the removal of gasoline (except for aviation gasoline) at the refinery or terminal rack, upon entry into California, and upon sale to an unlicensed person. Refunds of the excise tax paid on gasoline are allowed under certain circumstances to certain persons. (R&TC Section 8101.) For example, a refund is allowed to any person who buys gasoline to produce a blended fuel used to operate a motor vehicle on the state's highways when that blended fuel is taxed as a use fuel. (R&TC Section 8101(h).)

The BOE is responsible for various gasoline tax administrative functions including registration, licensing, return processing, auditing, and appeals. The State Controller's Office, in turn, is responsible for the collection of delinquent gasoline taxes and the issuance of excise tax refunds for gasoline not used on the highway. The gasoline tax collection point differs from that applicable to use fuels. Specifically, the gasoline tax is generally collected high up the distribution chain at the "terminal rack" level.

• 1. Alcohol fuel blends: Alcohol fuel blends are the result of blending two components – ethanol or methanol fuel and gasoline or diesel fuel. E85, for example, is produced by blending ethanol fuel and gasoline. The preferential excise tax rate for alcohol blends was originally established in 1981. According to the sponsor, the proponents of this lower rate were primarily interested in stimulating alcohol fuel production and sale. Specifically, the proponents argued that increased alcohol fuel production would reduce dependence on imported oil, create market parity by matching tax rates to alcohol fuel's lower BTU output, and promote Californian agricultural products used in creating alcohol fuels.
  2. CARB regulations: The author notes that "[i]n furtherance of its mission to reduce vehicle emissions, CARB has set specifications for E-85 requiring that the total fuel volume contain a minimum of 79% ethanol and 15-21% of hydrocarbons."^[3] The UFT Law, however, only provides the lower $0.09 per gallon tax rate to E85 containing no more than 15% gasoline. According to the author's office, the tension between these standards has made it difficult for some blenders to obtain gas tax refunds on their fuel blends. Specifically, the author's office notes:

While those purchasing pre-blended fuels can self-certify the content of their fuel with the Board of Equalization, those blending ethanol and gas themselves must apply to the State Controller's office to receive a refund of the tax they paid to purchase their fuel components. To receive this refund, blenders must submit receipts for their fuel purchases that show an exact 15% ratio of gas to ethanol was purchased. While some blenders have successfully claimed their tax credit, others have had confusion over what elements of their blend, such as denaturant, count as gasoline for tax purposes. As a result, some blenders have been denied their tax credit after making purchases and setting prices over the past year with the expectation of receiving it. This undermines the goals of the tax credit and CARB's mission by removing an incentive to use ethanol blends over gasoline.

• 1. Why not blend E85 with exactly 15% gasoline? If a blender were to create an ethanol blend with exactly 15% gasoline and 85% ethanol, this blend would seemingly meet both CARB's blend requirements and the 15% cap imposed by R&TC Section 8651.8. Thus, the blend would be eligible for the preferential tax rate of $0.09 per gallon, and the blender would be eligible for a refund of road taxes paid. CARB staff notes, however, that such a blend would likely not meet standards in place for the fuel's minimum Reid Vapor Pressure (RVP). RVP is a measure of fuel volatility, which must be managed to avoid smog formation in the summer. CARB staff notes that ethanol blends containing more than 15% gasoline would be more likely to meet the minimum RVP requirement. While CARB has apparently not instructed blenders to alter the gasoline content of their blends, it has informed blenders of this fact.

Despite all this, CARB data suggest that many, if not most, blenders are still producing E85 with only 15% gasoline. All E85 sold in California is sold under "test program exemptions". As a result, fuel blenders must provide fuel quality test results. CARB notes that this fuel quality data from 2014 and the first three months of 2015 indicate an average ethanol content of 82.75%, and an average gasoline content of 15%, with the remaining 2.25% comprised of denaturants. Fuel industry representatives, however, note that "denaturants" are gasoline-based, thereby threatening to increase the overall blend's gasoline content above 15%. If this is the source of potential conflict, perhaps it would be preferable to amend the R&TC to clarify that gasoline-based denaturants shall not be counted toward the 15% cap on gasoline for E85. BOE staff, however, notes that as a matter of administrative practice, denaturants are not counted currently toward the 15% gasoline cap. Proponents, however, contend that increasing the allowable percentage of gasoline to 18% would provide blenders a much-needed margin for error when attempting to satisfy both CARB's regulations and the provisions of the R&TC.

• 1. Should a sunset date be included? In general, higher gasoline contents result in better fuel economy. At the same time, however, the preferential tax rates were established to incentivize the use of renewable fuels and not gasoline.^[4] CARB notes that further research is still needed to determine the specific emissions benefits and downsides of various E85 blends. In addition, CARB notes that the E85 specifications are likely to be revised in the next two to three years, but no official timeline has yet been set. In light of this fact, the Committee may wish to consider adding a five-year sunset date to allow the Legislature to revisit this issue following the adoption of new E85 specifications.
  2. Related legislation: AB 1442 (O'Donnell) would have increased the allowable percentage of gasoline that may be included in E85, from 15% to 21%, and would have made corresponding changes to the definition of gasohol. AB 1442 died on this Committee's Suspense File.

REGISTERED SUPPORT / OPPOSITION:

Support

California Independent Oil Marketers Association (sponsor)

Opposition

None on file

Analysis Prepared by: M. David Ruff / REV. & TAX. / (916) 319-2098

1. The BOE notes that E85, an ethanol and gasoline blend, is the most common blended fuel under the UFT Law. ↑

2. This rate is comprised of an $0.18 excise tax and a $0.12 surtax. ↑

3. The sponsor notes that these regulations were filed on December 9, 1992, and became operative on January 1, 1993. ↑

4. According to the legislative history, the differential tax rate was also imposed to reflect the lower energy content (i.e., BTUs) of ethanol. It would appear that the energy content of ethanol has increased significantly in recent years, however. ↑